Monday

Nov 30, 2009 at 12:01 AMNov 30, 2009 at 2:24 PM

Illinois will cash in as people do more of their shopping online, but the receipts coming from individual Internet shoppers still represents only a small part of what the state collects in sales taxes.

Illinois will cash in as people do more of their shopping online, but the receipts coming from individual Internet shoppers still represents only a small part of what the state collects in sales taxes.

A report prepared by the Illinois Department of Revenue earlier this year put the state's estimated sales tax collections from Internet sales at about $678 million for the fiscal year ending June 30. That includes income from taxes paid on both retail and wholesale sales.

Businesses paying sales taxes on wholesale purchases represent the bulk of the online sales tax income, according to the study. Only an estimated $78 million comes from households purchasing items at retail over the Internet. The state's share of sales tax revenue in the 2008 fiscal year was nearly $8 billion.

The figures remain estimates, said Revenue spokeswoman Sue Hofer.

"We wouldn't necessarily know if (the tax receipts) came from online or at a store," Hofer said.

Retailers only collect the tax and remit it to the state. They are not required to separate it by type of sale.

Nonetheless, Revenue calculated state sales tax collections from online sales and they've shown a steady increase in the past five years. The department is also confident the state is not losing significant amounts of sales tax revenue to online sales. The report concluded Illinois is failing to collect about $153 million from online sales. It was prepared in response to a 2004 study from the University of Tennessee that Illinois could be losing $497 to $778 million in uncollected sales tax revenue from Internet sales.

Hofer said Illinois benefits that a large number of retailers who sell online also maintain bricks-and-mortar stores in the state. Under Illinois law, those stores must collect the sales tax on online purchases and remit them to the state.

Hofer said the department continues to consider ways of improving collections.

"We're waiting to see the best practices from other states. We want to see how they work before we act," Hofer said.

The department also believes that the most effective way of collecting the money is through federal legislation.